The company’s statutory net worth through the most recent quarter available. Consumers may wish to limit the size of any policy so that the policyholder’s maximum potential claims do not exceed approximately 1% of the company’s capital. For example, when buying a policy from a company with capital of $10,000,000, the 1% limit would be $100,000.
The sum of various resources which serve as a capital cushion to losses, including capital and surplus (see Capital).
A Weiss index that measures the adequacy of the institution’s capital resources to deal with potentially adverse business and economic situations that could arise. It is based on an evaluation of the company’s degree of leverage compared to total assets as well as risk-adjusted assets.
The total annual amount paid by the health insurer to providers (physicians or nurse practitioners) on a per patient basis. This amount is part of the provider compensation.
Cash on hand and demand deposits at year-end. A negative cash position implies checks outstanding exceed cash balances, a situation not unusual for insurance companies. This figure shows cash as a percentage of total invested assets.
The ratio of cash received from premiums (net of reinsurance) to cash outlays for claims and underwriting expenses, compiled from the annual report. A figure under 100% indicates that the company is paying out more in claims and expenses than it is receiving in premiums, whereas a figure over 100% indicates a positive cash flow. A negative figure generally indicates that the company has sold more business to a reinsurance company than it has taken in during the current year.
When a company has a positive net cash flow from its underwriting, it can generate additional funds for investing. On the other hand, if net cash flow is negative, the company may have to rely on its investment income to make up the shortfall. And if that isn’t enough, it may even have to sell assets to meet its obligations.
The city in which the institution’s headquarters or main office is located. With the adoption of intrastate and interstate branching laws, many institutions operating in your area may actually be headquartered elsewhere. So, don’t be surprised if the location cited is not in your particular city. Also use city to confirm that you have located the correct institution. It is possible for two unrelated institutions to have the same name if they are headquartered in different cities.
The percentage of the company’s investment portfolio from the annual report dedicated to CMOs (Collateralized Mortgage Obligations) and Other Structured Securities.
CMOs and other structured securities are mortgage backed bonds (see Bond) that split the payments from mortgage pools into different classes, called tranches. The split may be based on maturity dates or a variety of other factors. For example, the owner of one type of CMO, called a PAC, receives principal and interest payments made by the mortgage holders between specific dates. The large majority of CMOs held by insurance companies are those issued by government agencies and carry very little risk of default. However, they all carry some measure of risk based on the payment speed of the underlying mortgages.
The sum of the Loss Ratio and the Expense Ratio. The Combined Ratio shows how much the company is paying out in administrative expenses and claims for every dollar of premium collected.
Values over 100% indicate that the company is losing money on its underwriting. This is very common in the industry, but it’s still a sign of possible weakness. Underwriting losses can often be offset by income the company realizes on its investments. This is especially true for companies that issue policies on which they do not have to pay claims for several years (long-tail policies). With these policies, the premiums can be invested in order to earn income for the company until the claims are paid.
The percentage of the company’s investment portfolio from the annual report dedicated to common and preferred equities. Although a certain amount is acceptable for the sake of diversification, excessive investment in this area is viewed as a factor that can increase the company’s overall vulnerability to market declines. (Also see Common Stock and Preferred Stock).
A security that represents ownership in a corporation. Common stock holders have the right to vote on corporate policies and elect a board of directors, but they are at the bottom of the priority ladder. In the event of bankruptcy they get paid with whatever is left after secured creditors and the preferred stock holders are paid (see Preferred Stock).
Legal name of a firm, the title by which a formally organized or incorporated firm is known as a legal entity or artificial-person. Shown on the certificate of incorporation (firm's 'birth certificate'), it must be displayed clearly at the firm's legal or registered office, and disclosed on all formal documents such as agreements, checks, and official stationery. Also known as corporate name.
The total annual amount the health insurer pays its providers (physicians or nurse practitioners) for the services where the amount is fixed by contract. This amount is part of the provider compensation.